Treasury Strategy & Transformation
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Managing Risk in the New Financial Climate

BNP Paribas Cash Management University Preview

In last month’s edition of TMI, we introduced the 3rd BNP Paribas’ Cash Management University, which takes place on October 8 – 9 2009 in Paris, France. This year, the event will focus on two of treasurers’ most important priorities: liquidity and risk. In the second article in this series, we preview another of the workshops that will take place during the event, looking at treasurers’ approach to risk management, and how this may have changed over the past year.

Introduction

Managing risk has always been a priority for corporate treasurers, many of whom have invested significantly in people, processes and systems to help identify, monitor and manage risk effectively. The past year has witnessed changing attitudes, however, as many long-held assumptions about the markets and financial counterparties have been swept away.

During benign market conditions, with relatively low levels of volatility, treasurers have often adopted a fairly procedural approach to risk management. More recently, a variety of different factors have collided, leaving many firms with policies and risk management techniques that no longer reflect reality. Unprecedented market volatility, extreme events, rating downgrades and a liquidity drought have all forced treasurers to review their attitudes not only to market risk and operational risk, but also to focus more on counterparty risk and liquidity risk than they have done in the recent past.

Counterparty risk

With increasing recognition that no bank is ‘too big to fail’, counterparty risk is one of the primary issues which treasurers have sought to address. As Marcel Kellerhals, Group Treasurer, Panalpina Management Ltd, illustrates,